$3M Professional Liability (E&O) Insurance for Records Management Companies

For records management companies asked for $3M: Professional Liability (E&O) can be one $3M policy or a primary plus follow-form excess, and it usually needs a broker. Morrow can help you find it.

What does a $3M requirement mean for records management companies?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your services caused a client a financial loss. A $3M clause in a records contract might read like this:

• Per claim and aggregate: the most paid for one claim, and for all claims in a policy year.
• Claims-made: the policy covers claims made and reported while it is active, for work done after the retroactive date (the earliest date of work covered).
• Primary plus excess: the last sentence allows stacked policies. If your clause is silent, confirm with the client that primary plus follow-form excess meets it.
• Services named: make sure every service in the clause, such as imaging and destruction, is described on the policy.

Who asks records management companies for $3M?

Many records companies are asked for $1M or $2M. $3M usually comes with larger clients or more valuable records:

• Large law firms storing active litigation files offsite.
• Corporate legal departments that rely on you for retention schedules and legal holds (orders to keep records for a case).
• Courts and government agencies, where the limit is often set in the solicitation.
• Hospitals and health systems using you for chart storage or release of information.

If you host data or support e-discovery (finding and sharing digital files for a lawsuit), the client may expect Technology E&O (coverage for errors in technology services) and Cyber (coverage for data breaches and related costs). Attorneys who give legal advice usually buy lawyers professional liability instead.

How is $3M built?

A primary policy pays first. An excess policy pays only after the primary limit is used up. "$2M xs $1M" means a $2M layer that sits above the first $1M.

Compared with $2M, a $3M limit adds another $1M of protection for large file sets. If a client later asks for more, see $5M.

The excess should follow form. Every layer should share the same retroactive date and policy period. A commercial umbrella almost never covers Professional Liability, so it cannot fill the gap. See umbrellas and Professional Liability.

What will underwriters ask for?

An underwriter is the insurer's reviewer who decides whether to offer coverage. At $3M, expect closer questions on:

• Revenue by service, such as storage, scanning, shredding, release of information or e-discovery support.
• How you track records, such as barcodes, chain of custody logs and inventory audits.
• Your destruction process: written client sign-off, certificates of destruction, and how you stop destruction of records under a legal hold.
• Your largest clients and your share of law firm, court, healthcare and government work.
• The contract, your standard service agreement and any subcontractors.
• Loss runs (a report of past claims) for three to five years, plus your current policy and retroactive date.

What affects the cost?

• Services. Release of information, data hosting and e-discovery usually cost more than plain box storage.
• Client mix. Litigation files, court records and medical charts carry larger possible losses.
• How the $3M is built. The primary layer usually costs the most per $1M of limit. Excess is usually priced lower.
• Claims history and controls. Prior claims can raise prices on every layer.
• Retention and defense terms. Retention is the amount you pay yourself before the policy pays, like a deductible. A higher one usually lowers premium.

Frequently asked questions

Do I need $3M Professional Liability as a records management company?

Yes, if your contract or solicitation requires it. Check the clause for the limit and whether excess policies count. Morrow can review it with you.

What kinds of claims could be made against a records company?

Large claims usually involve lost, wrongly destroyed or mishandled records. Hypothetical examples: a law firm says you shredded boxes under a legal hold, and it faces court sanctions in a large case. A court agency says mis-indexed case files caused a missed filing deadline. A data breach may also need Cyber.

I have $1M. How do I get to $3M in Professional Liability?

Request new quotes through Morrow, either a new $3M primary policy or excess layers above a primary. Morrow can ask carriers to keep your retroactive date and prior acts coverage (coverage for work you did before the new policy started) where the market allows. Report anything that could become a claim to your current carrier before switching.

Can a client be added as an additional insured on my Professional Liability?

Usually not. Professional Liability protects you against client claims, so naming a client as an insured does not fit. Many clients accept a certificate of insurance (a one-page proof of your coverage) listing every layer, but some contracts ask for more.

This article is general information, not legal advice or a coverage determination. Coverage depends on the actual policy wording, carrier underwriting and your contract terms.